Italy released inflation data that revealed consumer prices actually fell 0.2% year-over-year in August, a sharp deterioration from 0.0% in July. In other words, Italy is in deflation.

"The releases add weight to speculation the European Central Bank could announce further monetary stimulus as soon as next week," argued Sbaihi and Shah. "This prospect is reinforced by a simultaneous release indicating that the euro area's third-largest economy [Italy] fell into deflation."

Pantheon Macroeconomics' Claus Vistesen, however, approaches the inflation report with a bit more caution.

"Price pressures in the eurozone remain very subdued, but it is important to note that energy prices are the main culprit for the very low inflation reading," Vistesen said. "The energy component plunged to -2.0% year-over-year in August from -1.0% in July, adding a significant drag to the headline number; excluding energy, inflation would have been 0.6% year-over-year."

Still, Vistesen believes that the numbers overall are ugly enough to force the ECB's hand.

"Coupled with a recent lurch lower in market-based inflation expectations, it continues to indicate that more stimulus is forthcoming from the ECB this year," he said.

Draghi Is Ready

"We stand ready to adjust our policy stance further," said Mario Draghi, president of the European Central Bank (ECB).

Based on recent moves in interest rates, it appears bond traders are betting more monetary stimulus is coming. As you can see below, the prospect for more intervention in the European bond markets has pushed yields in the eurozone to record lows.

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